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Are you interested in trading cryptocurrency but find yourself stuck when it comes to crypto terminology? When dealing with cryptocurrency, two terms you’ll encounter are crypto wallets and crypto exchanges.
The crypto wallet vs. exchange debate will help determine which one is best for you when it comes to protecting your crypto assets. But how do you differentiate these two terms?
Crypto wallets help you to transfer and store your crypto, while crypto exchanges are a marketplace for digital currency and its keys.
Here’s what you should know about crypto wallets versus exchanges in the crypto world.
What is a Crypto Wallet?
One of its main challenges lies in maintaining the safety of your purchases or wins. To solve this, crypto platforms give you two keys for your digital wallet that you can use to access your account: private and public.
You must have these two keys before accessing your account and may provide a third party or hold the private keys yourself for security. A private key combines locks or codes to access your account and spend your crypto.
It initiates transactions by signing up your coins for trading on the crypto platform and assures the buyer that you have enough coins for the transaction.
Types of Wallets
When working with crypto wallets, you must understand which type of wallet best suits your crypto needs. There are two major types: software and hardware wallets.
You can categorize these wallets as hot or cold wallets based on whether you store the keys online or offline. Cold wallets are stored offline in a physical hardware location, whereas hot wallets are hosted online.
Get to know the different subtypes of software and hardware crypto wallets.
Software Wallets – Hot wallets are hosted on online devices such as the web, mobile phones or desktops.
They include programs that ensure your coins are well protected, and you can access or spend them as needed. Here are the subtypes of software wallets.
Web Wallets – You can find these wallets on web browsers. However, they aren’t entirely secure or suitable for long-term storage or plans.
You can integrate them into non-fungible tokens (NFTs) or other apps and markets like DeFi.
Mobile Wallets – These wallets are perfect for your handheld devices. You can easily trade and transfer your coins using them in your apps.
Desktop Wallets – Use these wallets while you are on a desktop and gain access with your private key. Keep in mind, however, that you must enter using an internet-connected device, which carries the risk of hacking.
Hardware Wallets – Hardware wallets are small devices that control your cryptocurrency transactions. These devices store your private keys, making them an essential accessory when transacting with crypto.
Since you must connect to the internet to complete your transaction, hardware wallets are more secure than other wallets.
Communication goes from the device through an app to complete the crypto transaction. This process increases its safety and security.
Cryptocurrency Wallet Example
One of the best hardware wallets is the Ledger Nano crypto wallet. The package includes dependable cold storage options for making transactions through their app, making it a popular crypto wallet option on the market.
What is a Crypto Exchange?
It has its own wallet where you can save your coins once you purchase them. There are two types of crypto exchanges: decentralized and centralized systems.
Centralized systems have a unified system that matches the buyers to the sellers. It ensures all traders are within the stipulated rules, thus standardizing the transactions at market price.
You only need to set your price per the exchange rate. Centralized systems regulate the pricing, hence leveling trading activities across the platform.
This is unlike decentralized systems where sellers set the price and then find a willing buyer to complete the transaction.
Cryptocurrency Exchange Example
Coinbase is a popular cryptocurrency exchange platform. Despite its shortcomings in accessibility and regulation, Coinbase offers an affordable and versatile crypto platform where you can trade crypto coins.
iOS and Android apps support its activities on mobile platforms, increasing Coinbase’s service and reliance. By using high-speed software and apps, it enhances your interaction with other digital and crypto platforms.
Crypto Wallet vs. Exchange: How do they compare?
Comparing these tools directly will enhance your understanding of cryptocurrency and its associated terminology.
To settle the crypto wallet versus exchange rivalry, here are some similarities and differences to help you better understand their importance.
|Storage, send, and receive crypto||Private key access||No access to keys|
|East to use interfaces||Can’t purchase crypto directly||Ability to purchase crypto|
|Blockchain interaction||Anonymity||Requires user verification|
|High levels of security||100% control||Exchanges control your assets|
|Ability to stake|
Is it Better to Keep Crypto in a Wallet or Exchange?
Do you feel it’s better to keep crypto in a wallet or exchange? The role you allow these tools to play on your crypto journey will help you decide.
But remember, relying purely on one tool while leaving out the other won’t maximize your trading or security.
You must learn how to balance them so that they work well for you. Here are some situations that could help you with your choice.
Choose a Crypto Wallet If:
- You want to send, receive or store crypto coins on a platform with better security.
- You want to hold your private and public crypto keys.
- You highly value your crypto security and don’t mind the process of signing in.
- You are interested in trading crypto regularly.
- You want easy access to your account or trading details.
- You need your exchange account details and information backed up in the system.
These directions should help you clearly decide the tool that best suits your crypto needs and goals. If you are interested in securing your crypto assets, opt for cryptocurrency wallets.
Just remember you’ll have to move to the exchange platform when trading.